Cerberus Said to Consider Entering U.K. Market for New Mortgages

  • U.S. firm has acquired $17.4 billion of U.K. home loans
  • Mortgage company could seek new customers, people familiar say

Cerberus Capital Management LP is considering whether to start a business offering new U.K. residential mortgages from the remnants of Northern Rock Plc and Permanent TSB Group Holdings Plc, according to three people with knowledge of the matter.

The U.S. private-equity firm has acquired about 12.2 billion pounds ($19 billion) of U.K. home loans from the collapsed banks and could use some of these assets as a base for a new mortgage company, said two of the people, who asked not to be identified because the details are private. While the idea was presented to the British government, Cerberus doesn’t have a plan in place and no decision has been made, one of the people said.

Cerberus would join private-equity firms Blackstone Group LP and TPG Capital operating companies in one of Europe’s most lucrative and competitive property markets. While its Northern Rock and Permanent TSB loans place it within the top 20 lenders, it would be some way behind Britain’s biggest mortgage lender, Lloyds Banking Group Plc, with about 300 billion pounds of home loans, according to data compiled by the Council of Mortgage Lenders.

Landlord Loans

Cerberus could use a mortgage-servicing platform it acquired with about 2.5 billion pounds of Permanent TSB’s Capital Home Loans operation, which mostly includes performing buy-to-let advances to landlords, two of the people said. It could merge those assets with as much as 8.7 billion pounds of Northern Rock mortgages it acquired from the U.K. government last week, one person added.

Jeffrey Mayer, a senior managing director at Cerberus who was previously Deutsche Bank AG’s head of corporate banking and securities for North America, was appointed to the board of Capital Home Loans last month, company filings show. Pieter Korteweg, vice chairman and senior advisor of Cerberus Global Investment Advisors and former chief executive officer of Robeco Groep NV, and Hitesh Patel, the former CEO of insurer Lucida Plc, were also added to the board.

Kensington, Challengers

The private-equity firm would probably give its mortgage company a new name, one of the people said. Starting a U.K. mortgage firm would pit Cerberus against Blackstone and TPG’s Kensington Group, which focuses on specialist lending to self-employed homebuyers and buy-to-let landlords, as well as challenger banks such as TSB Banking Group Plc and Virgin Money Holdings UK. Plc.

Cerberus beat Blackstone, TPG and banks including JPMorgan Chase & Co. to win the biggest disposal of financial assets by the British government when it agreed to buy 13 billion pounds of mortgages from U.K. Asset Resolution Ltd., which manages the former Northern Rock loans on behalf of the state. Cerberus immediately sold 3.3 billion pounds of loans from the Granite securitization portfolio to TSB, the lender acquired by Spain’s Banco de Sabadell SA earlier this year.

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